Employer acted in good faith

An employee A underpaid tax in 2016-17. HMRC at first sought to collect this sum from her but she said it was the employer – the taxpayer – that was responsible for the underpayment.

HMRC wrote to the employer saying it appeared to have operated the correct tax code but not included the employee’s previous pay and tax. The employer said it could not understand why it was responsible considering the employee had been with it since before the start of the 2016-17 tax year. HMRC issued the taxpayer a reg 80 determination (PAYE Regulations 2003) to collect the shortfall stating it had failed to comply with reg 68. The taxpayer appealed.

The First-tier Tribunal found first that the reg 80 determination was invalid because HMRC had not followed the process required by reg 75A so had not created a deemed liability to be collected under...